What does the Budget offer Urban India?

UPSC Syllabus: Gs Paper 3- Indian economy

Introduction

The Union Budget 2026 presents cities as engines of growth under the vision of Viksit Bharat and stresses capital investment and productivity. However, the actual budget numbers show a clear retreat from urban development. Central support for cities has reduced at a time when urban India faces rising pressure from migration, climate stress, job needs, and ageing infrastructure. This gap between vision and funding defines the core concern of the Budget for urban India.

Status of Urban Budgetary Support

1. Decline in total urban allocation:The central outlay for urban development has fallen from ₹96,777 crore to ₹85,522 crore, a cut of ₹11,255 crore or 11.6%. After accounting for inflation, the real reduction is even deeper.
2. Mismatch between demand and support: Cities are expected to manage migration, climate risks, infrastructure stress, and employment creation with reduced financial support. Urban India is being asked to do more with fewer resources.
3. Urban development downgraded in priority: While capital expenditure is highlighted at the macro level, urban development is treated as a residual sector. It is adjusted after other fiscal priorities, not seen as a growth-critical investment space.

Recent Budgetary Arrangement for Urban Development

1. Metro rail dominance within a shrinking budget: The allocation for metro and mass rapid transit projects declined from ₹31,239.28 crore to ₹28,740 crore, a reduction of ₹2,499.28 crore, or about 8%. Despite this cut, metro projects continue to dominate urban spending.
2. One-mode concentration of urban funds: Out of the total urban outlay of ₹85,522 crore, metro rail alone accounts for ₹28,740 crore, which is 33.6% of total central urban spending. Nearly one-third of the urban budget is absorbed by a single transport mode.
3. Bias towards visible capital projects: Metro systems are capital-intensive, spatially limited, and socially selective. They mainly serve dense corridors in large cities and benefit formal, middle-class commuters more than the urban majority.

Major Concerns Arising from Recent Urban Budgetary Support

1. Cuts in affordable urban housing: The allocation for Pradhan Mantri Awas Yojana–Urban (PMAY-U) declined from ₹19,794 crore to ₹18,625 crore, a reduction of ₹1,169 crore or nearly 5.9%. This weakens efforts to address housing shortages, worsening affordability, and the expansion of informal settlements.
2. Sharp rollback in urban sanitation funding: The allocation for Swachh Bharat Mission–Urban (SBM-U) was reduced from ₹5,000 crore to ₹2,500 crore, a 50% cut. Urban sanitation requires sustained investment in waste processing, sewage treatment, faecal sludge management, and worker safety, not one-time spending.
3. Reduction in water and sewerage support: Funding for the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) fell from ₹10,000 crore to ₹8,000 crore, a 20% reduction. This affects cities already facing groundwater depletion, unequal access, ageing pipelines, and climate-induced water stress.
4. Neglect of inclusive urban mobility: There is no proportional investment in bus-based transport, non-motorised transport, or last-mile connectivity. These modes carry most urban trips and offer higher social returns than metro systems.
5. Weak fiscal position of urban local bodies: The contraction in central support is not offset by fiscal devolution or new municipal financing frameworks. Urban local bodies remain dependent on tied transfers and lack the capacity for long-term planning.
6. Timing of these cuts matters: These reductions come when cities are absorbing large-scale migration and demographic churn. Urban India is also facing rising unemployment, informalisation of work, and frequent climate shocks such as heat waves, floods, and water scarcity, making the fiscal rollback particularly damaging.

What Should Be Done

1. Recognise cities as growth engines: Urban India generates the bulk of GDP, absorbs labour, and supports innovation. Budget priorities should reflect this economic role.
2. Expand and rebalance urban spending: Urban allocations must increase in real terms and move beyond metro-centric planning. Everyday urban systems need priority.
3. Strengthen inclusive urban systems: Greater investment is required in buses, non-motorised transport, housing, sanitation, and water services to improve equity and resilience.
4. Empower urban local bodies: Cities need predictable, untied funding and stronger fiscal autonomy to plan and deliver long-term infrastructure and services.

Conclusion

The Union Budget 2026 celebrates cities in words but constrains them in finance. An 11.6% cut in urban allocations, deep reductions in housing, sanitation, and water, and one-third of funds locked into metro projects show a retreat from inclusive urban development. Without expanded, diversified, and decentralised urban financing, the promise of Viksit Bharat risks resting on underfunded cities and deferred futures.

Question for practice

Examine how the Union Budget 2026 reflects the government’s approach towards urban development in India, with reference to fiscal allocations, spending priorities, and their implications for inclusive and sustainable cities.

Source: The Hindu